Heteronomics Archive

November 04, 2025

RBA: Cautious Hold in Uncertain Times

The RBA held its cash rate at 3.6% as anticipated, but its decision marks a shift from easing after September's inflation surprise, signalling an extended pause in rate cuts through at least mid-2026.
Central forecasts now project trimmed mean inflation above 3% for the coming quarters before settling at 2.6% in 2027, requiring mildly restrictive policy rates of 3.4% by mid-2026—materially slower easing than many forecasters anticipated.
Labour market softening provides limited comfort as elevated vacancies and wage pressures persist. Two-sided uncertainty around demand strength and the global outlook creates risks justifying a cautious approach to future cuts.

September 30, 2025

The RBA holds at 3.6% as expected, but warns that Q3 inflation may exceed forecasts, with the underlying decline slowing.
Stronger Q2 GDP growth (1.8% annually) and a resilient labour market (4.2% unemployment) complicate the easing outlook amid a recovery.
A November rate cut remains possible but less likely, with banks split between November 2025 and May 2026 for the next move.

August 12, 2025

The RBA cut rates by 25bp to 3.60%, as expected, in the third reduction of 2025, with unanimous board support following July's surprise 6-3 hold pending inflation data.
The central bank downgraded its productivity growth assumption to 0.7% from 1.0%, lowering medium-term GDP forecasts and signalling structural economic challenges ahead.
The Governor signals that a "couple more" cuts are likely, with the cash rate path expected around 3.0% by 2026, while maintaining a data-dependent approach to future policy decisions.

July 08, 2025

The RBA surprised markets by maintaining the cash rate at 3.85%, rejecting consensus expectations for a cut and citing the need for further confirmation that inflation is sustainably on track to the 2.5% midpoint.
The decision reflects persistent uncertainty in the global economic environment and a domestic outlook characterised by robust labour market conditions but only gradual recovery in household demand, with risks on both sides of the inflation outlook.
The Board’s split vote and explicit data-dependent stance signal that future interest rate decisions will be highly sensitive to forthcoming inflation and labour market data, as well as evolving international developments.